Ready for the business game changers of tomorrow?

Heavy Duty Dialogue (HDD) is a business conference for those involved in the global and domestic on-and-off highway, heavy duty and commercial vehicle industries. A yearly event, it takes place the day prior to the annual Heavy Duty Aftermarket Week (HDAW) - the largest North American gathering of the independent heavy duty industry, held in January in Las Vegas.

One of the presentations at this year’s HDD was a market analysis, North American Aftermarket Channel Outlook, presented by Kumar Saha, an industry analyst with consulting firm Frost & Sullivan’s Automotive & Transportation practice.

Competitive Landscape

In examining the marketplace, Frost & Sullivan’s research found that the original equipment service channel (dealerships) currently holds about 40 percent the market. That share is expected to increase in the coming years as a result of competitive pricing, quicker turnaround times and increasing verticalization of components.

“Dealerships will leverage the increasing use of proprietary parts in trucks, as well as their superior technician training and diagnostic capabilities, in the face of increasing technological complexity,” said Saha.

The independent channel holds about 60 percent of the market, the research discovered. This channel comprises the larger heavy duty specialists and parts networks, smaller independent repair facilities, automotive warehouse distributors and other participants such as truck stops, small independent retailers.

“Overall, the independent channel is forecasted to lose market share, primarily because of the inherent weakness of the smaller market players,” Saha explained. “Within the independents, the larger heavy duty specialists, such as FleetPride and TruckPro, along with the heavy duty parts networks - who currently are about 30 percent of the market - will gain some of the market share that the smaller operations lose, primarily through takeovers and consolidation.

Meanwhile, automotive distributors, such as NAPA and Carquest, are making “heavy inroads” into the trucking sector, found the research.

Strengths and Weaknesses

Frost & Sullivan’s research also looked into the respective strengths and weaknesses of the various aftermarket channels.

“Dealerships are typically strong in repairing advanced technologies and have the component knowledge base because of their relationship with truck manufacturers and OE parts suppliers,” Saha said.

“On the other hand, parts and service costs at dealerships are typically higher than other channels. Many of the fleet managers interviewed said dealerships tend to be slower in their service turnaround.”

The larger heavy duty specialists “typically excel where the OES channel is lagging. They not only offer all-make, all-model parts coverage, but also have competitive parts and service prices.”

Saha observed that companies such as FleetPride “are sitting in a sweet spot. They are large enough to invest in their technicians and knowledge development, and at the same time, they have the economies of scale to offer competitive prices to the customer.

“However, heavy duty specialists are still in the process of updating their distribution and inventory systems, and this area continues to be their Achilles Heel.”

Repair Facilities

“Joe’s garage may be low tech, but it will work round the clock to get a truck back on the road. However, limited technical expertise and localized operations don’t bode too well for this channel.”

Truck stops and travel centers, meantime, have been actively developing their presence in two of the highest-growth, highest-volume aftermarket categories - tires and aftertreatment, he noted.

“But the very nature of the business - serving trucks on the go, limits their potential to undertake major repairs, which are typically high margin since they use more expensive parts and require longer labor times.”

A Brewing Storm

Frost & Sullivan’s research also focused on whether the different aftermarket channels are ready to take on the challenge of the rapid technological advancement in heavy duty trucks.

“Going forward, the rising complexity of components and increasing adoption of new technologies will put technician knowledge management issues at center stage,” said Saha. “The dearth of skilled heavy duty technicians is another brewing storm.”

“In terms of expertise, heavy truck repair channels have had a good run with a solid base of skilled technicians who have served the industry well over the years. But the average age of these professionals is rapidly rising as aftermarket channels are finding it increasingly harder to attract younger technicians because of the complex and tough nature of the work.”

Despite the slight economic recovery, Saha said fewer shops are providing the level of training they have historically offered. In 2010, only 55 percent of independents provided formal training to their staff compared to 87 percent in dealerships.

Major Game Changer

Technical expertise - technician knowledge base and advanced diagnostic capabilities - “will be a game changer in the future,” maintained Saha, because fleets are increasingly adopting new, more complex technologies.

“There is one thing that will separate the winners from the also-rans: technical preparedness,” he concluded. “Technical knowledge management - or lack thereof - remains the 1,000-pound elephant in the room.